Despite the costly extended warranty project for the Xbox 360, Microsoft remains optimistic and confident that their entertainment and devices division, the department in charge of the Xbox 360, will be better for the next fiscal year.

Although Microsoft has estimated that their extended warranty project will cost US$ 1 billion, it's been reported that the actual figure amounts closer to $1.2 billion. They have declared a total loss of $1.89 billion for their entertainment and devices division.

Microsoft added that it would have been a greater loss had there not been a reduction in the cost of manufacturing the console. Factors that contribute to the loss is the decrease in sales of the Xbox 360 and PC Games. Sales of 360 accessories and the Zune helped offset the loss however.

However, being the giant that it is, US$ 1.89 billion for Microsoft as a whole is just a drop in the bucket. The revenues of their entertainment and devices division for the fiscal year ending on June 30 is up 28%, reaping in US$ 6.08 billion despite the warranty extensions. Microsoft itself garnered US$ 51.12 billion, a 15% increase from last year. The revenue comes from increased sales of hardware, software, TVs, mobile devices and the strong presence of Windows Vista and Microsoft Office 2007.